Fertiliser and explosives maker Incitec Pivot has increased full year profit 13 per cent and says 2012 will be a transition year as it seeks to expand the Asia-Pacific explosives business.
The company also said it had a positive view of the long-term outlook for global fertilisers.
Incitec booked a net profit of $463.2 million for the 12 months to September, up 12.8 per cent from a year earlier.
Incitec’s explosives business benefited from a long-running program to increase efficiency, and the fertiliser business benefited from higher prices.
“However, when I look at the result, I know we can do better, and we have in the business what I’ve described as a ‘significant gap to perfect’,” managing director James Fazzino told reporters on Monday.
Mr Fazzino said Incitec would seek growth in areas linked to Asia and generate benefits from a productivity program called BEx (Business Excellence).
The most obvious place to start looking for growth opportunities was in the Asia-Pacific explosives business which supplied the minerals sector that fed China, he said.
Mr Fazzino said Incitec’s new ammonium nitrate plant at Moranbah in Queensland was 86 per cent complete and on track to start production in the third quarter of 2012.
Earnings from production at Moranbah was likely to be minimal in 2012 but Moranbah would roughly double the earnings of the Asia-Pacific explosives business by 2015.
Incitec was spending $40 million on building an emulsion plant in Western Australia’s Pilbara region which would support the iron ore sector.
The company had also announced a feasibility study on building a “world-scale” ammonium nitrate plant at Kooragang Island in Newcastle to support the Hunter Valley coal sector.
Incitec said the Asia-Pacific explosives business would grow earnings modestly in fiscal 2012, which the company described as a transition year.
Net profit excluding significant items rose 20 per cent to $530.1 million.
It included a record profit in the explosives business, which accounts for about 50 per cent of Incitec’s operations.
City Index chief market analyst Peter Esho said the Incitec earnings result was slightly ahead of expectations.
But Mr Esho added that the market appeared to be concerned that Incitec’s forecast fertiliser production at its Phosphate Hill plant in Queensland would be slightly lower in 2012 than in 2011.
“I think the market had some slightly rosier expectations,” Mr Esho said.
Shares in Incitec Pivot fell five cents to close at $3.47.
Incitec’s Mr Fazzino said half of Incitec’s explosives business was in North America, the largest explosives market in the world.
He expected the US economy to remain relatively soft but over the long term he was more positive.
“In the short term, we’re going to see quite a bumpy ride to recovery,” Mr Fazzino said.
In relation to the fertiliser business, Mr Fazzino said the outlook for agriculture globally was positive, with demand for food outstripping supply this season for the eighth time in 12 years.
“If the world needs to grow more food, one of the key ways of doing that is to increase fertiliser use,” Mr Fazzino said.
